Hedge Fund Consensus Stocks vs. Nielsen Holdings plc (NLSN) In 2019
We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Nielsen Holdings plc (NYSE:NLSN).
Nielsen Holdings plc (NYSE:NLSN) was in 30 hedge funds' portfolios at the end of the third quarter of 2019. NLSN shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 35 hedge funds in our database with NLSN positions at the end of the previous quarter. Our calculations also showed that NLSN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26345" align="alignnone" width="600"]
Paul Singer of Elliott Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let's analyze the latest hedge fund action encompassing Nielsen Holdings plc (NYSE:NLSN).
What does smart money think about Nielsen Holdings plc (NYSE:NLSN)?
Heading into the fourth quarter of 2019, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NLSN over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Windacre Partnership was the largest shareholder of Nielsen Holdings plc (NYSE:NLSN), with a stake worth $324.7 million reported as of the end of September. Trailing Windacre Partnership was Elliott Management, which amassed a stake valued at $297.5 million. Ariel Investments, Renaissance Technologies, and Deccan Value Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Windacre Partnership allocated the biggest weight to Nielsen Holdings plc (NYSE:NLSN), around 16.24% of its 13F portfolio. Litespeed Management is also relatively very bullish on the stock, earmarking 8.15 percent of its 13F equity portfolio to NLSN.
Seeing as Nielsen Holdings plc (NYSE:NLSN) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of funds that slashed their entire stakes heading into Q4. Interestingly, Paul Singer's Elliott Management said goodbye to the largest position of the 750 funds followed by Insider Monkey, comprising close to $67.8 million in stock, and Leon Cooperman's Omega Advisors was right behind this move, as the fund said goodbye to about $57.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 5 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Nielsen Holdings plc (NYSE:NLSN) but similarly valued. These stocks are Douglas Emmett, Inc. (NYSE:DEI), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Huaneng Power International Inc (NYSE:HNP), and AerCap Holdings N.V. (NYSE:AER). All of these stocks' market caps match NLSN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DEI,20,570666,1 TEVA,23,660560,-2 HNP,3,2567,0 AER,28,1220299,1 Average,18.5,613523,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $614 million. That figure was $1129 million in NLSN's case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Nielsen Holdings plc (NYSE:NLSN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately NLSN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NLSN were disappointed as the stock returned -9.2% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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